Early Thursday, Barrick Gold Corp. reported a big drop in earnings for the second quarter, citing rising costs and falling gold production. The big surprise was massive overruns at its giant Pascua-Lama mine on the border of Chile and Argentina. Barrick said the project could run as much as 60% over the high end of its last forecast, putting the total cost at some $8 billion.

The earnings release was a first for Jamie Sokalsky as chief executive. Barrick’s former chief financial officer took the top job last month after the surprise ouster of Aaron Regent. Barrick’s board at the time said it was unhappy with shareholder returns, and it falls to Mr. Sokalsky to boost those.

In an interview Thursday, Mr. Sokalsky defended Barrick’s record, saying that while he’s injecting more discipline in capital-allocation decisions, Barrick’s approach has always been conservative. He said the cost overruns at Pascua-Lama were more about execution and project management.

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Gold bars at Bullion Trading LLC in New York.

Mr. Sokalsky also said he was still optimistic about gold prices, underpinned by central-bank buying and flat or declining supply. The following is an edited transcript of the interview:

WSJ: Amid Barrick’s emphasis today on a new rigor in approving projects based on returns, is there any sense that the company has been too lax in approving projects in the past?

Mr. Sokalsky: These are still very good projects and we green lighted them when the gold price was much lower…. If a mistake was made it was certainly in the structure as to how we set up the building of Pascua-Lama. But I don’t see that we made any fundamental mistakes in making investment decisions in the projects that we have … that we are currently constructing…

WSJ: You have said repeatedly today that Barrick will ensure shareholder returns drive production-growth decisions. Are there instances where that hasn’t been the case in the past?

Mr. Sokalsky: I think the industry has inordinately been focused on production growth, and companies were getting premium valuations if they could show that they could grow production. And I’d say that we’ve been more disciplined than most companies, and that’s why we haven’t necessarily been able to compete on production growth that some other companies have demonstrated. So, I think we’ve had a disciplined approach to that. I think we’re just picking that up a notch and heightening that.

I’d say there have been instances on a more modest basis: we have looked to produce ounces organically that ultimately don’t make the rate e of return that (we) should be generating for the investment. So there have been instances like that, but I don’t think there have been significant ones that have caused us to destroy value.

WSJ: You said today that Barrick’s inhouse mine-construction unit wasn’t up to the task at Pascua-Lama. Are you scrapping plans to take on more such construction oversight in the future?

Mr. Sokalsky: We still need to have people that oversee construction managers, and I think with this project, we just took too much of that ourselves….

We’re going to move back to the standard model of having an (engineering, procurement and construction-management) contractor build projects for us. But we’ll still need to have some project management people that will be the liaison and work with those EPCM contractors. But our model will be–we’re a mining company, not a construction company, and we’re going to let the construction companies build these mines for us.

WSJ: What are the prospects for gold prices, despite their recent slump?

Mr. Sokalsky: There are still very good fundamental, bullish factors for the gold price that should be very supportive. Certainly, the macroeconomic environment–central banks buying gold; China and India being big purchasers of gold; against the backdrop of a likely flat supply from the mining industry and perhaps declining. You see how difficult it is to build projects and bring on new production. Ultimately, I’m still very positive for the gold price.

But we can’t rely on that. We need to manage the business and do it in a conservative way and make sure we have good rates of return at prices that are lower than we are today. And if the gold price does go up, then we’re just going to have enhanced returns. But we need to make sure we can make money not betting on a higher gold price.

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